Not Applicable
Not Applicable
The method and apparatus of the present invention relate to a commercial network system to facilitate transactions.
Buyers and sellers traditionally exchange information, goods, and services for money through one of several methods. In the most common of these, the seller sets the price, and the buyer either accepts that price or doesn""t (for example, retail, or most classified ads). In another common method, the buyer and seller agree to a price (for example, a flea market, or a classified ad which includes xe2x80x98or best offerxe2x80x99). Sometimes buyers compete and the highest price offered wins (for example, a standard auction, a reverse auction, or a Dutch auction). Sometimes sellers compete for a given buyer (for example, a xe2x80x98wanted to buyxe2x80x99 classified ad). Other commerce systems are exchange-driven, and buyers and sellers are matched in an orderly marketplace (such as the NASDAQ or the New York Stock Exchange). In all of these buyer-seller protocols, the buyer and seller agree to the price and other payment terms before the information, goods, and services are provided. Several U.S. patents relate to on-line electronic communications and processing of transactions between multiple buyers and sellers with these various buyer-seller protocols. But for every single one of these, the buyer and seller do agree to a price before the transaction is completed; indeed, if an agreement on price and other terms cannot be reached, the transaction does not occur.
While each of these systems does enable and make efficient some types of transactions, other transactions are not able to be carried out or are not done optimally for a variety of reasons. For example, a buyer may be uncertain about the value of the item(s) he/she is considering buying and might therefore be reluctant to make the purchase. Unless the item is a commodity product (i.e. identical to or interchangeable with another item of the same type), the value of the item will not be immediately apparent and will take time, effort and cost for the buyer to determine, based on the item""s unique features. An item could be intentionally or unintentionally described incorrectly or incompletely by the seller, misleading the buyer about its value.
In some cases, the value of an item to a given buyer simply cannot be known until the item is received and used. Economists call such items xe2x80x9cexperience goodsxe2x80x9d. One example is a research article which may or may not contain some specific information that a buyer is looking for: if the information is in the article then the article is valuable to the buyer, but if not then it is worthless to him/her.
Additionally, each of these systems requires that the buyer and seller agree to not just the price but all the other terms of the transaction as well, before the transaction can occur. There are often high costs associated with this activity, such as lengthy contracts with various conditions and stipulations. Even for those transactions which do get carried out, there are issues with the systems that are currently used. For example, even after an item is delivered, there may be disputes about whether the item that was delivered is really the item that was described by the seller: for example, some features of the item detracting from its value may not have been mentioned by the seller. Additionally, a buyer may not know anything about a seller and may be unsure about whether that seller can be trusted. Some attempts have been made to minimize the negative effects of these problems, such as warranties and money-back guarantees or consulting xe2x80x9con specxe2x80x9d, but each of these has its own set of limitations that restrict its use and can introduce inefficiencies and costs into the transaction process. Similarly, a seller may not know anything about a buyer and may be unsure about whether the buyer is serious about purchasing the item, and whether the buyer has enough money to pay for the item.
Another issue is that some people don""t like to negotiate, and may choose not to engage in a transaction which requires negotiation, or one which is likely to result in a suboptimal deal without negotiation.
Another issue is enforcement. If either participant feels that the other has committed a fraudulent act, he/she does have some recourse through legal channels; but this activity can be time-consuming and expensive.
Additionally, customer service is sometimes low-quality, because a seller may not have sufficient financial incentive to provide high-quality customer service once he/she has received payment for the information, goods, and services provided.
Furthermore, existing pricing methods are not well-suited to items which can be sold to multiple buyers, such as information. For example, auctions operate based on competition between buyers for a given item, but if the item can be provided to a potentially unlimited number of buyers, the supply is not constrained and buyers have no reason to try to outbid one another.
Also, buyer-driven systems are not prevalent in general, because buyers usually do not want to be inundated with numerous offers from potential sellers, many of whom may be marginal or unqualified (e.g. a thousand real estate brokers or car dealers all calling one buyer).
Furthermore, buyer-driven systems impose inherent costs on sellers as well. If each buyer has a different set of purchasing specifications and communicates his needs using non-uniform language, sellers must pay a substantial cost to review and understand each individual request. Moreover, sellers are often not amenable to customizing their products for individual buyers.
The applicant is unaware of the existence of any commercially-viable commerce system which addresses the above-described shortcomings in the prior art by allowing the buyer to set the price following receipt of the item. Therefore, it is one object of the present invention to set forth a system of electronic commerce that offers the capability for buyers and sellers to transact and for buyers to set the price for a given item after receiving the item.
In order to understand the requirements necessary to form binding contracts through electronic commerce, a brief review of the current state of contract law is necessary. An essential prerequisite to the formation of a contract is an agreement: a mutual manifestation of assent to the same terms. This is the case for the present invention: the buyer and seller both understand that the seller is providing the item to the buyer without any guarantee of a specific payment, and state such understanding by accepting the user agreement when registering to use the system.
With the advent of new technology, methods of doing business are rapidly expanding. These new methods challenge traditional contract principles, which are premised on personal contact and paper contracts. Thus, some legal issues in the field of electronic commerce remain unresolved. Despite the uncertainty, when a transaction occurs in a purely electronic environment, the threshold legal determination revolves around whether the electronic messages establish an offer and acceptance given the absence of documentation.
The exchange of electronic messages that offer and accept a contractual relationship should form a contract with respect to the specific order. An offer consists of an expression of a willingness to enter a contract when that expression occurs in a form sufficiently concrete to establish that agreement. Under this doctrine, an electronic message may constitute the necessary expression of intent. Problems exist where unauthorized people or inaccurate information trigger an offer from a system. These problems could be solved by methods of attribution or authentication. Once questions of attribution are resolved, and subject to considerations about the Statute of Frauds and the like, no requirement exists in law that a contract offer be in writing.
Of course, the writing requirement can be satisfied by other means. For example, if the electronic agreement is followed up by a letter or if the system routinely yields printed output, the requirement should be satisfied. But apart from a printed output at the receiving point or in a functional acknowledgment returned after receipt, the enforceability of a purely electronic contract depends on how the computer system retains records of the transaction and whether a court will accept the idea that electronic records reduce the message to tangible form.
In accordance with the present invention a method and apparatus for a commercial network system designed to facilitate transactions for which a buyer determines the price he/she pays after receiving the information, goods, and/or services from a seller.
The present invention is a method and apparatus for effectuating post-transaction-priced transactions of goods, services, and information in exchange for money or its equivalent (such as credits). The invention allows prospective sellers of information, goods and services to offer those items globally to potential buyers, for buyers to make item requests of sellers, for sellers and buyers conveniently to search for relevant buyer and seller information, for sellers to provide items to buyers without any guarantee of a specific payment amount, and for buyers to decide how much to pay for those items after having received them.
The method and apparatus of the present invention have applications on the internet as well as conventional communications systems such as voice telephony. Each participant can communicate with the system from remote terminals adapted to access communication links and the system may include remote terminals adapted for storage of a remote database. The system includes a database which contains participant and transaction information. The database is accessed via a validation procedure to permit transactions in an interactive online mode between users during interactive transaction sessions wherein one participant to the transaction is specifically selected by the other participant. The system permits concurrent interactive business transaction sessions between different participants.
In one embodiment of the present invention, communications between buyers and sellers are conducted using an electronic network and a system operator. A seller who wishes to sell an item accesses the system operator located at a remote server. The seller then specifies the item he/she wishes to sell, searches for buyers who might be interested in receiving such an item, and provides a description of the item (if the item is goods or services) or either a description of the item or the item itself (if the item is information) to those buyers. For example, a typical item could be a well-researched article about a specific subject, on which the seller is an expert. The seller searches and identifies one or more buyers who might be interested in the article, and then either provides the article or a description of it to the buyer(s). Under the present invention, the information may be transmitted via numerous means including a world wide web interface, email, voicemail, facsimile, or postal mail. Alternatively, the information may be developed while the seller is online with the system operator. The system operator then assigns a unique tracking ID to the item and the item is sent to each buyer that the seller specified. Subsequently, the buyer logs on to the system, views items that have been provided to him/her, and optionally specifies payment amounts for those items or requests additional information from the seller(s). After the buyer has sent the payment to the system operator to cover the item(s), the system operator sends a payment to the seller(s). Various methods of payment may be utilized by the invention, including credit cards, personal checks, electronic funds transfer, debit cards, digital cash, and escrow accounts.
The present invention can also be practiced in off-line embodiments. Instead of using email or web-based servers, buyers and sellers may communicate with the system operator via telephone, facsimile, postal mail, or another off-line communication tool. For example, sellers may use telephones to provide items (with or without the assistance of live agents) and buyers may use a telephone to buy those items.
In a preferred embodiment, the method and apparatus of the present invention include a mechanism through which information about participants and previous transactions is revealed in such a way as to encourage buyers to pay a fair amount for the items provided, and to encourage sellers to provide items that are of high value to the buyers to whom those items are provided. The system stores information regarding previous transactions and makes this information available to participants, so that they are able to intelligently decide which participants are worth transacting with. For example, a buyer who routinely pays nothing for items will soon have difficulty finding sellers interested in selling him/her any items, while a buyer who consistently pays a fair price for items will be able to expect a steady stream of items. Similarly, a seller who consistently provides items for which buyers are willing to pay large amounts will subsequently have greater ability to provide items to buyers, while a seller who provides items which buyers generally find worthless will have great difficulty finding any buyers to provide items to.
It is a goal of the present invention to provide a robust, global system which incorporates various methods of communication, commerce and security for the buyer and the seller, enabling sellers to provide information, goods, and services to buyers without the promise of any specific payment, and for those buyers to receive the information, goods, and services and subsequently decide how much (if anything) to pay the seller(s). The present invention enables some transactions to occur that might otherwise not, and enables some other transactions to be handled better than through traditional pricing methods.
It is an object of the invention to overcome the aforementioned limitations of the prior art.
In traditional systems, if a buyer is uncertain about the value of the item he/she is buying, he/she might be reluctant to make the purchase. Similarly, if a buyer fears that an item is deliberately or unintentionally described incorrectly or incompletely by the seller, he/she might be reluctant to make the purchase. In the present invention, that reluctance is unnecessary because this risk has been eliminated, since the buyer is not obligated to pay a fixed amount for the item, but can instead pay whatever he/she feels is appropriate (including nothing at all).
In traditional systems, a buyer may not want to devote the time, effort and cost necessary to determine the item""s value, based on its unique features. In the present invention, there is no time, effort and cost required for such a determination, because the value will be known later, upon actual use of the item.
In traditional systems, transactions of xe2x80x9cexperience goodsxe2x80x9d are often problematic because the value to the buyer can only be known by the buyer after receipt and use of the item. In the present invention, experience goods do not pose such a problem, because the buyer doesn""t have to determine the price he/she is paying until after receipt of the item, at which point he/she will know its value.
In traditional systems, further problems arise from the fact that there are usually many characteristics of an item which affect its value, and these need to be known by and agreed upon by the buyer and the seller before an appropriate price can be established. In the present invention, this often laborious activity is no longer necessary, because the price is set by the buyer after he/she has the item and can easily determine its value.
In some traditional systems, negotiation is required in order to get the best possible deal, but a lot of people don""t like to negotiate and/or are not good at it. The present invention eliminates the need for negotiation for both the buyer and the seller.
In traditional systems, there are often disputes after a transaction is completed, for example if the buyer feels that the item was not as described or some features of the item detracting from its value were not mentioned by the seller. In the present invention, neither party has any reason to fear that such a dispute will arise: the seller has agreed to sell with the understanding that he/she might not get anything for the item, and the buyer has the ability to set the price and therefore is not at risk of being shortchanged.
In traditional systems, enforcement is sometimes difficult. If either participant feels that the other has committed a fraudulent act, he/she does have recourse through legal channels, but this activity is time consuming and potentially expensive. The present invention makes enforcement unnecessary, because the seller has agreed to sell with the understanding that he/she might not get anything for the item, and the buyer has the ability to set the price and therefore is not at risk of being shortchanged.
In traditional systems, trust is a significant issue. The buyer and seller might not know anything about each other. If either party doesn""t have a well-established reputation, the other party may be reluctant to engage in a transaction. The buyer may be wary of whether the seller can be trusted, and the seller may be uncertain about whether the buyer will be able to pay for the item. In the present invention, trust is not an issue, because the seller has agreed to sell with the understanding that he/she might not get anything for the item, and the buyer has the ability to set the price and therefore is not at risk of being shortchanged. (Note that reputation is still very important; in a preferred embodiment, participants can see how other participants have behaved in earlier transactions, and can decide who to transact with based on this information.)
In traditional systems, customer service is often low-quality, because the seller has insufficient financial incentive to provide high-quality customer service once the payment has been made. In the present invention, the seller does have a financial incentive to continue to work toward insuring the buyer""s satisfaction, since the buyer""s ultimate payment will likely be based on not just the item but the total package provided, including customer service.
Traditional systems are not well-suited to items which can be sold to multiple buyers, such as information, because there is no competition between buyers to outbid each other. In the present invention, the seller has control over how many potential buyers are able to buy the item, and can therefore limit supply to try to support a reasonable price. Also, for experience goods, items may be worth much more to one potential buyer than another. In the present invention, sellers who are able to determine which potential buyers might derive the most benefit from a given item are most likely to benefit financially.
In traditional systems, buyer-driven systems are not prevalent because buyers do not want to be inundated with numerous offers from potential sellers, many of whom may be marginal or unqualified (e.g. a thousand real estate brokers or car dealers all calling one buyer). In a preferred embodiment of the present invention, buyers have at least partial control over which sellers are able to provide them with items.
In some traditional systems, each buyer has a different set of purchasing specifications and communicates his needs using non-uniform language, and sellers often must pay a.substantial cost to review and understand each individual request. In the present invention, such detailed review of various items is unnecessary, as the buyer is not at risk if the item is not what is desired.
In traditional systems, the more complex the item is in terms of features, the more difficult it is to determine a fair price. Such complexity ceases to be a disadvantage with the present invention, because the buyer will be able to determine a fair price in the normal course of using the item.
For many types of transactions, the method described by this invention is an improvement over all of the traditional methods. It will enable some types of transactions to occur more efficiently than previously, and it will enable other types of transactions which probably would not have occurred at all without this invention. One reason that the buyer-sets-price-after-receiving-the-item method hasn""t been successfully implemented is that no previous system provided the buyer with an incentive to pay anything. However, the present invention does. As described herein, in a preferred embodiment, the system stores and makes available to participants information about other participants"" previous transactions, such as average payment overall, average payment by item type, and item descriptions. This information enables participants to see which other participants are worth transacting with: for example, sellers who provide items that other buyers have been willing to make large payments for, or buyers who tend to make large payments. Additionally, in a preferred embodiment, buyers can specify that they will accept items only from sellers who have received at least a certain minimum average payment in previous transactions (herein called a xe2x80x9ccutoff percentilexe2x80x9d). As a result, buyers who have higher average payments will subsequently tend to get higher quality items; this provides them with an incentive to pay for the items they do receive. Sellers (especially high-quality sellers) will tend to provide items only to buyers who have demonstrated a willingness to pay a fair amount for what they receive. Sellers will not want to waste their time and energy providing items to buyers who have acted in such a way as to lead these sellers to believe they will not receive a fair amount for the items they provide. Similarly, sellers will have a motivation to provide high-quality items, and to provide them to the buyers who will derive the most value from them. Sellers who provide items haphazardly will tend to be penalized in the form of lower average payments, meaning that they would subsequently be able to provide items to a smaller subset of the buyers (specifically, those buyers with cutoff percentiles low enough to include the seller). It is the iterated nature of the transactions coupled with the availability of information about those transactions that makes the quality of items and the fairness of payments in the system self-regulating. The ability of buyers to see information on sellers and (in a preferred embodiment) to screen out unacceptable sellers makes the quality and quantity of transactions in the system self-regulating. Note that unlike through most traditional systems in which the benefits of iterated transactions (trust, reputation, etc.) accrue only as the same buyer and seller repeatedly interact with one another, this system provides such benefits to all participants, so that even before a buyer and seller have ever directly interacted with one another, each will have a good idea of whether the other participant is someone with whom he/she wants to engage in transactions.
The inventor""s expectation is that free market forces will enable this invention to lead to a new and efficient pricing system and will enable some transactions to occur more efficiently and other transactions to occur which otherwise might not occur at all. The inventor believes that while the present invention works for all types of items including information, goods, and services, it will probably prove to be most valuable for information, relatively valuable for services, and only slightly valuable for goods. The reason for this is as follows. Most physical goods have a fairly well-established value (or at least a range of values, depending on the specific features), so a seller might be reluctant to sell goods without a promise of any payment. However, a given piece of information is often much more valuable to one party than to another, so the seller would be inclined to provide it to the buyer, who values it much more highly than the seller does. Additionally, since some information can have multiple owners (i.e. a seller who sells information still has that information, which isn""t the case with physical goods), most sellers will be less reluctant to provide such information to a buyer without promise of payment than they would to provide physical goods.
Another advantage of the present invention is that (in a preferred embodiment) each buyer can govern the quantity of items received by an appropriate specification of the cutoff percentile. Buyers who only want a small quantity of items can set their cutoff percentile to a low number (e.g. 25%, meaning that only the top 25% of all sellers are able to provide items to this buyer), while buyers who want a high quantity of items can set it to a high number (e.g. 75%). What""s more, the invention tends to automatically maximize the quality of the items, given the specified quantity, by having the selection criteria be determined by average payment (or average payment per item type), a good measure of quality.
Additionally, this system automatically enables sellers with high average payments to provide items to more buyers than those with low average payments (again due to the cutoff percentile), providing sellers with an additional incentive to provide high-quality items.
Another advantage of the present invention is that the system operator has the ability to alter the characteristics of the system to maximize the value of the system. For example, by making the requirements for joining as a buyer or a seller more or less restrictive, the ratio of buyers to sellers can be governed, a powerful tool in regulating the quality and quantity of items and the payments provided: A few examples will illustrate this point:
a. If the average cutoff percentile is low or falling, that probably means that the ratio of sellers to buyers is too high; the system operator could remedy this by being more restrictive when allowing new sellers to join or by more actively marketing to new buyers.
b. If the average payment is low or falling, that probably means that either quality is low or falling, or that the supply of items is high or rising; the system operator could remedy this by being more restrictive when allowing new sellers to join or by more actively marketing to new buyers.
c. The system operator can encourage buyers to set high or low cutoff percentiles (in those embodiments which include this feature), for example by setting a certain default value, to affect the quantity and quality of transactions.
d. The system operator can modify the minimum payment amount (in that embodiment), to affect the quantity and quality of transactions.
e. The system operator can modify the time period that buyers have to assign a payment amount and the time period that buyers have to make the payment, to affect the average payment.
f. The system operator can modify the number of transactions required before a participant""s data appears in the system, to affect the quantity and quality of transactions.
g. The system operator can modify the requirements for joining the system and the minimum performance level required to stay in, to affect the quality and quantity of transactions.
h. The system operator can shift how the value is divided between the two sides (buyers and sellers) in various ways to make sure that both sides get enough value to make participation worthwhile.
i. The system operator can modify the ratio of buyers and sellers in the system (such as by having different restrictions on joining or by differential marketing efforts), to affect the quantity and quality of items.
Another advantage of the present invention is that it can be utilized as a standalone system and it can also be integrated into other systems. For example, systems which currently employ other pricing mechanisms such as retail or auctions could offer the method of the present invention as a pricing option for their users. In some such embodiments, a plurality of such systems might be linked together to aggregate some data and to enable participants in different systems to engage in transactions with each other; in other such embodiments, they might not be linked together in this fashion.
The present invention is revolutionary in that it no longer requires that the buyer and seller reach an agreement about the value of an item before the transaction can occur. One advantage this system has over existing systems is that it enables the price to be related to the actual value provided, not just the apparent value. Also, it enables those with items of real value to provide them and receive a fair amount for them, creating a system in which those who have the highest-quality items collect the most revenues, rather than those who spend the most on advertising and branding, and creating a system in which the actual value that buyers derive from items is the most important determinant of price.
It is one object of the present invention to set forth a system of buyer-driven electronic commerce that enables sellers to provide information, goods, and services to buyers without any guarantee of a specific payment, and for those buyers to pay whatever amount they feel is appropriate after receiving the information, goods, and services.
It is a further object of the present invention to provide information about previous system transactions in such a way that participants are able to decide which other participants they would want to transact with.
A further object of the present invention is to ensure that buyers using the system are not inundated with items from unqualified sellers, and to ensure that sellers using the system are not inundated with item requests from unqualified buyers.
It is another object of the present invention to allow for items, such as information, which can be bought by multiple buyers.
Another object of the present invention is to show how all or part of the system can be practiced using electronic means such as the internet.
Another object of the present invention is to show how all or part of the system can be practiced using non-electronic means such as printed media or advertisements in newspapers.
Another object of the present invention is to enable give buyers and sellers performing transactions through traditional means another pricing option.